While marijuana legalization continues to spread across the US, cannabis stocks are currently trading at some of their lowest market values this year.
This downward trend can be attributed in part to more widespread inflation concerns but uncertainty surrounding attempts on Capitol Hill to federally legalize cannabis are also likely playing a role.
The Senate is currently weighing up such a bill but is yet to announce when it might reach the floor for a vote. This has dampened some of the investor enthusiasm surrounding marijuana stocks, but that doesn’t mean they’re not still a strong play, especially for the long-term investor.
One of the favored investing methods for marijuana right now is cannabis REITs, which have performed a lot better during this mini-downturn than a lot of the other marijuana options on the market. Plus, they offer dividends to long-term shareholders.
Another route that could provide a sound investment option for the cannabis investor is the medical marijuana sector. Comprehensive federal cannabis legalization could still be some way off, but this is unlikely to slow the growth of the medical marijuana industry, which now operates legally in 35 states.
The medical marijuana sector is also likely to benefit from an increase in research into the plant’s therapeutic benefits, a move that’s in the offing under President Biden’s administration.
More health-focused marijuana research would likely result in more medical cannabis companies seeking Food and Drug Administration (FDA) approval for their products. And given the unmet demand for marijuana-based medications in the US, that means strong growth potential.
That doesn’t mean you should blindly put your money into any cannabis REIT or medical marijuana stock. Make sure you research a company’s performance and study the factors that affect the stock price before putting your capital at risk.
With that in mind, here’s two of our picks among marijuana stocks that could be worth your attention if you want to get involved in cannabis investing.
Innovative Industrial Properties, Inc.
Innovative Industrial Properties, Inc. (IIP) is a real estate investment trust that’s focused on the legal marijuana industry in the US and becoming become one of the largest players in the cannabis REIT market.
IIP owns 7.3 million square feet of property with a further 2.7 million square feet in development. In total, it owns 75 properties across 19 states, all of which are under lease with an average term of nearly 17 years.
This amounts to around $1.4 billion invested, with a further $417.5 million earmarked for property renovations and improvements. IIP is also looking to expand its property portfolio in Pennsylvania, which looks poised to legalize recreational cannabis, and Massachusetts, which launched legal adult-use sales last year.
IIP has generated around $91.8 million for the first two quarters of 2021 – a growth of 101 percent from last year.
This performance translated into a 32 percent share dividend increase for shareholders compared to the year prior.
IIP’s debt stands at around 21 percent of its total gross assets, which are valued at around $2.1 billion.
IIP’s share price closed at $232.53 on October 8, 2021 – up nearly 27 percent compared to last year. It’s 52-week price range goes from a high of $253.61 to a low of $112.25.
Stock analysts at CNN Business have IIP down for a 12-month median price target of $260 per share, which would be an 11.8 percent increase from its last closing price – not a bad return for one of the more solid cannabis stocks.
Jazz Pharmaceuticals plc
Jazz Pharmaceuticals is a biopharmaceutical company with a focus on products that treat sleep and movement disorders.
Jazz recently acquired GW Pharmaceuticals which manufactures Epidiolex, a seizure medication that’s one of the only cannabis-derived drugs approved for use by US and EU regulators. It’s therefore well-positioned to receive regulatory approval for marijuana medications in the future.
Jazz’s second quarter results for 2021 show its recent acquisitions made up 41 percent of its total product sales, which suggests the company is making the right moves. In total, its Q2 revenues increased by 34 percent to $751.8 million compared to last year.
Jazz’s share price closed at $135.97 on October 8, 2021 – a near 5 percent increase in five days, but down 17.62 percent compared to last year. It’s 52-week price range goes from a high of $189 to a low of $126.01.
Market Beat analysts think Jazz will be trading at $208 per share within 12 months, which would be a 53 percent increase from its current trading price. One cannabis stock to keep an eye on for those looking for a value play in the medical marijuana sector.